Zara owner Inditex missed sales and profit forecasts on Wednesday, hit by adverse currency moves and an unusually warm September, leading investors to wipe more than $5 billion off the fashion retailer's market value at one stage. The Spanish group, which also owns upmarket label Massimo Dutti and teen brand Bershka, is highly sensitive to fluctuations in the euro as it sells from China to Russia to India across its thousands-strong global portfolio of stores.
Controlled by founder Amancio Ortega, one of the world's richest men, Inditex generates more than half of its sales in currencies other than the euro and then books those sales in euros when reporting results. However, its centralised sourcing and distribution model means a large chunk of its costs are in euros.
Inditex, which did not give details on the currency moves that hit its results, reported nine-month earnings before interest and tax (EBIT) of 3.07 billion euros ($3.5 billion), up 3 percent on the year-ago period. The growth would have been 14 percent at constant exchange rates, it said. The negative currency impact on sales in the third quarter was 3.2 percent, the company added.
"We believe the global apparel retail market continues to face significant structural challenges and Inditex is no longer best positioned," said Bank of America Merrill Lynch in a research note.